Main ideas & concepts covered

Lecture structure & study approach

• The basic life insurance exam lecture is organized into:
  • Categories
  • Content
  • Memorization points
  • A table of “frequently missed answers”
• Because many wrong answers recur consistently, the key advice is to master the “frequently missed answers” wording.

Definition and history of life insurance

Definition

• Life insurance is risk preparation through the spirit of mutual assistance.

Common wrong-answer note

• For “mutual assistance,” an incorrect option mentioned is “Hongik Ingan”.

History in Korea / modern introduction

• Mentions an era involving pooled support (linked to “Gae”).
• Mnemonic tip: use “Samgyetang” to remember the era when this began and whether it continued.
• Notes religious developments as background:
  • Buddhism → national religion in later dynasties.

Modern history (Korea–Japan context)

• Life insurance is introduced when Japan establishes an agency in Korea via the Treaty of Ganghwa.
• Incorrect-option warning: “Joseon Life Insurance Company” is presented as wrong.

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Timeline characteristics (modern history: 1960s–2000s+)

1960s

• Hard economic conditions → individuals insure mainly if wealthy.
• Growth of group insurance for employees’ basic livelihood.
• Government designates life insurance companies as national savings institutions.
• Wrong answer: “private insurance” (if used here).

1970s

• Private insurance grows.
• 1977 is designated as the Year of Insurance.
• Mnemonic: lucky 7 → memorize as 77.

1980s

• Rapid national growth tied to the 1988 Seoul Olympics.
• Wrong option: interpreting it as entering a competitive system too early.

1990s

• Enters a competitive system → excessive competition leads to the IMF crisis.
• Licenses of four insurance companies revoked.
• Frequent wrong answers: mixing up which decade is which (60s/70s swapped, 80s/90s swapped).

2000s

• Bancassurance (bank + insurance)
• Since 2003, insurers sell insurance via banks.

2010s

• Since 2010, insurance can be bought online → sales channels diversify.

Regulation (2021)

• Act on the Protection of Financial Consumers (abbrev. FCA)—questions may ask when enacted.

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Functions of life insurance

Two broad categories

• Social security system
• Asset management principles

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Social security system (welfare) — structure & memorization

Core keyword

• A state welfare system designed to guarantee a minimum standard of living.

Common wrong-answer framing

• Confusing “minimum standard of living” with a different expression.

Three categories

1. Social insurance (“the four major insurances”)
   • National Health Insurance
   • National Pension
   • Industrial Accident Insurance
   • Employment Insurance
   • Tip: memorize these as the “four major” ones even though NHIS may be paid together with long-term care premiums in practice.
   • Memorization cue hinted: excluding National Pension, what word ends all the rest (and that “insurance” appears).

Public vs private distinction

  - Social insurance is **public insurance run by government**.
  - Insurance sold by companies is **private insurance**.
  - Wrong example: describing social insurance as **civil insurance**.

1. Public assistance

   • Not exhaustively listed in the lecture; described as everything not ending in “insurance” or “welfare”.

2. Social services

   • Examples: welfare for elderly, disabled, children, and family welfare
   • Memorization rule: social services end with “welfare.”

Study strategy note (multiple choice)

• Don’t memorize everything like for subjective exams; tailor to multiple-choice.

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Asset management principles — list + exam focus

The four principles of life insurance asset management

• Safety
• Profitability
• Liquidity
• Public interest

Profitability (exam emphasis)

• Exam question: how high should profitability be?
• Anchor concept: applicable interest rate
• Per the lecture: operate assets so that return is higher than the applicable interest rate.
• Caution: don’t overextend in real estate just to chase high returns.

Liquidity (exam emphasis)

• Liquidity = ability to convert to cash.
• Prefer assets that can be quickly turned into cash (e.g., deposits, short-term bonds) rather than real estate, to pay claims promptly.

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Industry status & outlook (Korea)

Premium income ranking

• 9th in the world (also noted: a rough “within 12” style option).

Managed assets breakdown (largest → next)

• Securities
• Then loans, cash, real estate
• Exam trick possibility:
  • If asked within securities, the answer given is government bonds (largest).

Total fertility rate definition

• Because Korea has the lowest among OECD, tests may ask the definition:
  • Total fertility rate = average number of children a woman of childbearing age is expected to have lifetime.
• Likely wrong options include “low birth rate” wording.

Population aging classification (elderly share thresholds)

• 7%: aging society

• 14%: aged society

• 20%: super-aged society

• Korea entered super-aged society in 2024

Poverty rate / pension and insurance coverage

• Relative poverty rate for age 66+ group cited around 40%.
• Wrong-answer examples may include 1%, 33.3%, 3% (as contrasts).
• National Pension: replacement rate will be lowered in the future.
  • Wrong option often: saying it will be adjusted upward.
• National Health Insurance coverage rate:
  • Currently ~65%
  • Government wants above 70%, but it stagnates → statement that NHI is being expanded further is incorrect.

Cause of death

• 1 cause: malignant neoplasms (cancer).

• Exam note: they won’t ask ranks 2–4 here—just remember “cancer is #1.”

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Income vs expenditure across the life cycle (graph interpretation)

• Income and expenditure do not match over time.
• Early age and old age:
  • Expenses > income
• Middle age:
  • Income > expenses

Interpretation tips

• The period where income exceeds expenses is called “female income” (as taught).
• For “income generation period” questions: answer middle age.
• Remaining income is used to pay off early-career loans and set aside for old-age shortages.
• Consumption vs income curve:
  • Consumption is more gradual/flatter than income.
  • They do not match in timing.

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Inflation risk and why insurance is positioned as a key “investment”

• When prices rise:
  • Money’s value decreases
  • Real purchasing power decreases
• Recommendation: instead of holding cash-like assets for inflation, invest in financial products—ideally insurance.

Argument about insurance expanding beyond pure underwriting

• Due to the Capital Market and Financial Investment Act, industry boundaries weaken.
• Insurance products can function more like banking/securities; thus exams may ask you to trust insurers and buy insurance.

Wrong claim noted

• “Products are simplified because industry classification is becoming stricter due to the Capital Market Act.”

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Basic principles of life insurance (theory) — list + exam traps

Included principles

• Law of large numbers
• Life tables
• (Mentioned as “dendritic patterns” / pattern concept)

Law of large numbers

• More observations → probability approaches a constant.
• Life insurance requires a group with multiple subscribers sharing the same type of risk.
• Wrong option warning:
  • “Deviation increases as observations increase.”

Life tables

• Tables estimating how many people in an age group die in a year.
• Korea uses the 2024 experience life table as reference (per lecture).
• Wrong example:
  • Using National Life Table as reference (stated as incorrect).

Principle of mutual equivalence

• Insurer’s viewpoint:
  • Income = total premiums received
  • Expenses = total payouts + various costs
• “They are equal” is the mutual equivalence principle.

Exam nuance

• If “all ages” / “all insurance” appears as an incorrect-option-style choice, treat it as wrong.

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Life insurance contract parties (roles)

Three key roles emphasized

• Policyholder
• Insured
• Beneficiary

Contract structure note

• Stakeholders are described as four in total, but insurer details are deemphasized for exam focus.

Policyholder

• Enters contract; pays premiums; role is mainly income/qualification-based.
• Wrong misconception corrected:
  • Policyholder’s health/age is not the qualification focus.

Duty to disclose before contract (policyholder)

• Policyholder discloses income, not health/age.
• If contractholder changes (e.g., children take over), the company verifies new holder eligibility; the company must approve the change.

Multiple contractholders

• Generally rare, but theoretically multiple contractors are possible.

Insured

• “Subject of the insurance accident.”
• “Insurance accident” includes any event enabling payout:
  • maturity, death, hospitalization, surgery, outpatient treatment
  • For pensions: “survival” is the insured event
• Eligibility: health must be disclosed before signing.
• Multiple insured persons:
  • Generally rare, but family coverage can exist as a rider (and “prenatal-style” insureds may be included).

Beneficiary

• Receives insurance money.
• Eligibility: “person” can be:
  • natural person
  • legal person (corporations)
• No health/assets qualification needed.
• Change-related consent rule:
  • If policyholder/insured/beneficiary are different, insurer approval may be unnecessary for beneficiary change, but insured’s consent is required.

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Duties to notify (exam-confusing topics)

Emphasis

• Duty to notify before contract
• Duty to notify after contract

Policyholder (as taught)

• Duty to notify before contract
• Duty to notify address changes
• Notify insurer about insured accident

Insured

• Discloses health before contract
• Duty to notify insurer when an accident occurs
• Not about address change

Beneficiary

• No pre-contract disclosure obligation
• Must notify address changes and accidents after signup.

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Calculating insurance premiums — two methods (list + comparison)

Two main methods

• Three-member committee method (older)
• Cash flow method (currently used)

Three-member committee method (Ham-ui-won)

• Based on 3 profit sources:
  • projected risk rate
  • projected interest rate
  • projected business ratio
• Conservative assumptions; simpler calculation.
• Disadvantage: hard to reflect each company’s diverse situation → less precise premiums.

Cash flow method

• Applies multiple basic rates (including elements from the 3-commission system, retention rates, sales volume, etc.).
• Advantage: more sophisticated premiums per company; enhances autonomy in product development.
• Disadvantage: complex and high calculation cost.

Geography note

• 3-2 method widely used in Asian countries.
• Cash flow method widely used in non-Asian countries.

Exam note

• May be frequently tested.

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Formation of contract & withdrawal/approval rules

Contract formation

• Requires:
  • offer expressing intention to contract (by applicant)
  • acceptance (by company)

Withdrawal (subscription/application)

• Called withdrawing the subscription/application.
• Likely test focus: how long withdrawal is allowed.

Withdrawal window

• Within 15 days from the date securities are received
• But capped at a maximum of 30 days from the application date to prevent abuse (delaying receipt)

Exceptions

• “Professional policyholder diagnosis” contracts
• Contracts with insurance period of 9 days

Premium refund timing after withdrawal

• Company must return premium within 3 business days if premium already paid.
• If paid by card: cancel card payment within 3 days.
• If return delayed beyond 3 days:
  • company must pay insurance contract loan interest (described as high, compounded annually) for the excess period.

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Acceptance / approval

• Called “approval.”
• Contract formed only with consent (consensual contract).
• Insurer can reject (not obligated to accept unconditionally).

Rejection rules

• Non-diagnosis contracts: reject within 30 days from application date
• Diagnosis contracts: reject within 30 days from diagnosis date
• If not rejected within 30 days → automatically accepted (cannot refuse after 30 days).

If a claim is rejected

• Refund premiums are returned.
• Interest rule described:
  • “1% added to average declared interest rate,” compounded annually for the period from payment to return.

Mnemonic

• “Loan interest” when insurer thought to have done something wrong
• “Publicly announced interest rate” otherwise

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Start of coverage (validity conditions)

General transactions

• Contract effective on the company approval date.

Insurance contracts (policyholder benefit)

• Effective date = date first premium is paid
  • even if company hasn’t approved yet

No-diagnosis contracts

• Effective from first premium payment.
• Credit card: date card information provided = premium payment date.

Diagnosis contracts

• Effective when both:
  • first premium is paid
  • diagnosis is completed
• Order can be reversed; coverage starts after both are completed.

Exam-style scenario

• If payment made but diagnosis not yet received, and an unrelated injury occurs before acceptance:
  • insurer must cover (coverage exists once the premium was paid).

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Invalidity, cancellation, termination

Overview framing

• Invalidity/cancellation/termination differ based on fault and process.

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Invalidity (company wrongdoing) — key points

• “Invalidation” can be applied without time limit.

• Applies when insurer commits wrongdoing; example:

  • policyholder and insured are different AND insured’s written consent was not obtained
  • risk: secret signup for death payout insurance (could be abused, e.g., murder)

• Also void for certain groups (as taught):

  • under 15, mentally incapacitated/weak → death insurance invalid regardless of consent
• Social customs violations can make contract void under civil law (examples: gambling/crime use).

Exception (“other matters”)

• Group insurance may validate contract even if under weakness categories, if insured has decision-making capacity.

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Cancellation (less severe than invalidity) — key points

• Cancellation possible within 3 months.
• Cancellation requires meeting “three basics,” memorized via a mnemonic:

Mnemonic: Cheongyakja

1. delivery of a copy of application form
2. delivery and explanation of terms and conditions
3. contractholder’s handwritten signature

• Cancellation timing logic:
  • since the cancellation period follows the three basics → 3 months
• What must be explained:
  • only important details (e.g., coverage scope, payment restriction reasons), not every term.

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Cancellation refund vs full refund

• In cancellation:
  • insurer returns only cancellation refund, not full premiums.
• Reason:
  • customer fault (e.g., duty to disclose prior to contract violated) or cancellation due to change of mind.

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Termination due to duty-to-disclose violations — “company can’t terminate” (5 cases)

• Lecture says there are five main instances when the company cannot terminate even if duty-to-disclose was violated.

1. Company already knew the policyholder lied at signup (should have refused then).
2. Insured tried to state an illness during signup, but the insurance agent silenced them.
3. Company discovered it later but missed required decision timing:
   • logic similar to acceptance/rejection timing: must cancel within one month
   • if a month passes → cannot cancel
4. If 2 years pass from coverage start without a claim-causing event, the contract won’t be terminated even if disclosure violation existed.
5. If 3 years pass from contract signing date, the contract also won’t be terminated.

Study emphasis

• Invalidity/cancellation/termination section: at least one question is guaranteed; mark for repeated review.

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Obligation to pay insurance benefits

Death benefits & “disappearance” (exam focus)

General disappearance

• If whereabouts remain unknown for 5 years, court presumes death.

Special disappearance

• For cases like ship sinking/aircraft crash where death is likely but body not found:
  • if life/death unknown for 1 year, court considers person deceased.

Recognized death

• In widespread disaster events (floods/wildfires), government agencies recognize death promptly.

Simple memorization

• General: 5 years
• Special: 1 year
• Government must report recognized death immediately.

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Disability (injury/disease-related situations)

• “Disability” payment relates to “research-related damage/loss” wording (as taught).
• Temporary disability exception note:
  • memorize that 5 years or longer → 20% paid (as stated).

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When insurers pay claims

• Default:
  • claim payment within (the lecture summary cuts off here)